Exclusive: Amazon plans mega-warehouse for Mexico growth spurt

MEXICO CITY (Reuters) - Amazon.com Incis preparing to open a 1 million square-foot warehouse near Mexico City, sources familiar with the project said, part of an effort to boost its presence in Mexicos nascent e-commerce industry.

The new warehouse is slated to be built in the Tepotzotlan municipality about 25 miles (40 km) north of the Mexican capital, according to four Mexico City real estate professionals familiar with the plans. Expected to be completed next year, the facility would triple Amazons distribution space in Mexico, home to around 120 million potential customers.

Amazons Mexico push comes amid talks to revamp the North American Free Trade Agreement, which could benefit the Seattle-based retailer if the United States persuades Mexico to raise a $50 limit on the value of online purchases that can be imported duty-free.

Amazon is a relative newcomer to Mexico; it opened its Kindle e-books site to Mexican customers in 2013 and expanded into sales of physical goods just two years ago. But it is growing much faster than rivals such as Wal-Mart Stores Inc, and is already the nations third-largest online retailer. Amazon posted $253 million in sales in Mexico last year, more than double the year before, according to market research firm Euromonitor International.

Sharing a nearly 2,000-mile long border with the United States, Mexico would seem a logical place for Amazon to expand. But duplicating the companys U.S.-style success could prove tougher.

Online shopping comprises nearly 3 percent of all retail sales in Mexico compared with over 10 percent in the United States. Some Mexican shoppers are wary of online fraud and many do not have credit cards.

Some analysts believe Amazon is willing to take the risk as it races to bulk up in foreign markets to compete with fast-moving global competitors such as Chinas Alibaba Group Holding Ltd.

Amazon is not afraid to plow into a new market in a very big way, take a big hit, but say, 10 years down the line, this is going to be big and profitable, said Neil Saunders, managing director at the GlobalData Retail research firm.

Amazon spokesman Julio Gil declined to comment on plans for a new warehouse in Mexico. He said the companys Mexican unit is aiming to expand its product offerings, offer faster deliveries and make the purchasing process as smooth and secure as possible to inspire consumer confidence.

Were trying to eliminate any friction, Gil said.

FLUID LOGISTICS

Amazon currently operates two distribution centers in Mexico totaling more than 500,000 square feet (46,452 sq m), Gil said. Both are in Cuautitlan Izcalli in the state of Mexico, adjacent to the autonomous district of Mexico City, whose metro area is home to more than 20 million people.

The new warehouse will be constructed about 7 miles (11 km) from the existing facilities. All are located along the so-called NAFTA highway, an industrial belt that runs through Mexicos factory regions to the U.S. border.

The new facility is being built by industrial developer Fibra Prologis, according to sources familiar with the plans. The Mexico-based real estate investment trust owns 34.2 million square feet (3.2 million sq m) of manufacturing and logistics space across Mexico. Prologis declined interview requests.

At 1 million square feet, the new facility would be able to distribute bulky products such as furniture, as well as small items like books and microwaves, a set-up Amazon uses in other foreign countries, said Marc Wulfraat, president of the logistics consultancy firm MWPVL International.

If about 85 percent of the space is used for small productstypical of a U.S. warehouse set-upAmazon would be able to store 15 million products and make up to 1 million deliveries a day nationwide. It would likely employ 2,000 to 3,000 people to handle the shipments, Wulfraat said.

The location could also serve as a distribution point for products going north to the United States, added Saunders from GlobalData.

Amazon is very fluid with its logistics, he said. As long as that border is reasonably open, Amazon is very agnostic.

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